Despite the stock market recovery over recent months, it is possible to buy cheap stocks today. They could be appealing because their prices may undervalue their long-term prospects. This could mean that they offer long-term capital growth potential.

Furthermore, the stock market has an excellent track record of recovering from its downturns to post new record highs. This could increase the chances of today’s cheap shares posting turnarounds.

Meanwhile, other mainstream assets such as cash and bonds offer very low returns at the present time. This may increase the appeal of undervalued shares on a relative basis.

Cheap stocks may be mispriced

It is difficult to determine the value of many companies today. Their financial performances are being disrupted by coronavirus in many cases, which could mean lower profitability in the short run. However, a number of cheap stocks appear to be undervalued based on their long-term growth potential. For example, industries such as banking and retail are likely to ultimately return to more attractive operating environments in the coming years. Therefore, current levels of profitability may undersell their prospects.

Buying any asset at a price that is lower than its intrinsic value is likely to increase the chances of generating positive capital returns. With sentiment currently very weak in some sectors, there may be opportunities for investors to buy high-quality companies while they offer wide margins of safety.

A track record of recovery

The chances of a long-term recovery for many of today’s cheap stocks appear high. The stock market has experienced numerous downturns in its past, and has always been able to produce new record highs. Similarly, the world economy has experienced many recessions and periods of slower growth. It, too, has always bounced back to post positive GDP growth.

With many major economies likely to benefit from stimulus packages over the coming years, the outlook for many regions could be positive. This may lead to rising profitability for many of today’s undervalued shares that allows them to command higher stock prices over time.

The relative appeal of cheap shares

Buying cheap stocks could be even more appealing because of the lack of value available elsewhere. Bond prices have risen to high levels over recent years in response to low interest rates, while property prices have surged in many major economies for the same reason. Meanwhile, cash returns are extremely low, and could even be below inflation over the long run.

As such, on a relative basis, cheap shares could be attractive purchases. Certainly, they may experience further challenges in the short run from a tough economic outlook that leads to disappointing financial performances. However, over the coming years a portfolio of undervalued stocks could realistically produce high returns that improves an investor’s financial situation.

More reading

• IOOF (ASX:IFL) share price on watch after second quarter update
• Here’s why the Tyro (ASX:TYR) share price is in focus today
• Why the a2 Milk (ASX:A2M) share price could tumble lower today
• Why the Eagers Automotive (ASX:APE) share price is on watch today
• 2 top ASX dividend shares to buy in February

Motley Fool contributor Peter Stephens has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post 3 reasons why I’d buy cheap stocks right now and hold them to 2030 appeared first on The Motley Fool Australia.

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The IOOF Holdings Limited (ASX: IFL) share price will be one to watch this morning.

This follows the release of the financial services company’s second quarter update.

How is IOOF performing?

It was an eventful second quarter for IOOF, with Funds Under Management, Advice and Administration (FUMA) falling $0.4 billion to $202.4 billion at the end of December.

Management advised that this reflects an uplift of $12.7 billion in FUMA due to market movements, which was offset largely by one-off negative movements of $10 billion.

These negative movements include $8.1 billion from the termination of the BT relationship, $1.5 billion from the liquidation of IOOF’s Cash Management Fund, and a $0.4 billion one-off transfer from the Cash Management Trust.

IOOF’s Chief Executive Officer, Renato Mota, also revealed that the company was impacted by the Early Release of Super (ERS).

He said: “This quarter has seen ongoing impacts of ERS, especially the final opportunity for early access. As well, we have experienced the ongoing impacts of COVID, including client concern and uncertainly around ongoing and potential economic impacts. Our ClientFirst approach has been invaluable in ensuring that our clients have the support that they need during times of significant uncertainty.”

Nevertheless, the strong market performance helped offset much of this to leave its FUMA down only slightly for the three months.

“There has been strong market performance over the quarter and as a result of the scale and diversity of our business, the market contribution of $12.7 billion to FUMA has largely offset outflows.”

Mr Moto was also pleased with the progress the company is making with its transformation plans.

He commented: “We are making good progress towards the transformation of the business. In particular, we are transforming the advice business through our Advice 2.0 strategy and progressing our platform simplification strategy, while supporting IOOF’s open architecture approach and enabling choice for our clients.”

The Chief Executive is now looking ahead to the middle of the year when its FUMA should be boosted by the acquisition of the MLC business from National Australia Bank (ASX: NAB).

“We have continued to meet key milestones in the execution of our transformation program including Advice 2.0 and Evolve. We are progressing well and meeting targets to enable the completion of the proposed MLC acquisition before 30 June 2021,” he added.

No guidance has been given in respect to first half profits or its expectations for the full year.

More reading

• Is the NAB (ASX:NAB) share price a buy?
• ASX 200 Weekly Wrap: Change in America spurs ASX 200 higher
• IOOF exec says she was sacked for mental illness
• This top broker thinks the NAB (ASX:NAB) share price is a strong buy
• 5 things to watch on the ASX 200 on Tuesday

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Tyro Payments Ltd (ASX: TYR) share price is one worth watching in early trade today. All eyes will be on the Aussie payment solutions provider after the company released an update regarding its terminal connectivity saga.

Why is the Tyro share price in focus?

Wednesday evening saw Tyro provide a final status update on its terminal connectivity issue. The issue first came to light on 7 January 2021 and has been the subject of much attention, pushing the Tyro share price down 24.7%.

Tyro reported that the number of terminals connected to its network has now returned to pre-incident levels. This was confirmed by real-time monitoring data of terminals connected to Tyro’s switch engine over the last month.

However, it wasn’t all good news for shareholders and the Tyro share price is one worth watching as a result. Tyro said there are a “limited number” of active merchants still impacted by the connectivity issue.

486 merchants currently do not have an operational terminal. Tyro is continuing to work with these operators to get their payments systems back online.

1,490 merchants have at least one fully operational terminal but also at least one non-functioning unit. There are also 643 merchants with terminal types over 6 years of age which are no longer manufactured. Those units are now obsolete and merchants are being encouraged to replace them.

The Tyro share price has been under pressure due to the connectivity issue for nearly all of January. This includes fending off activist short-sellers targeting the Aussie payments group.

To that end, Tyro also provided a transaction value status update yesterday. Transaction value compared to FY20 numbers is up 8% date on date, and same day on day compared to 26 January.

January year to date figures are up 9% to $13.779 billion compared to $12.606 billion in FY20. That also makes the Tyro share price one to watch early on Thursday.

Foolish takeaway

Yesterday’s update is just the latest chapter in the ongoing connectivity issue impacting the Tyro share price. Shares in the payments group are worth watching in early trade following the company’s final status update.

More reading

• Why IDP Education, Lake Resources, Mach7, & Tyro shares are shooting higher
• Why Tesla (NASDAQ:TSLA) shares were last year’s worst short bet
• Why Frontier Digital Ventures, JB Hi-Fi, Regis, & Tyro are dropping lower
• Kogan (ASX:KGN) pays price for illegal emails
• ASX 200 rises 1.2%

Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Tyro Payments. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The A2 Milk Company Ltd (ASX: A2M) share price will be on watch this morning following the release of an announcement.

At the time of writing, the fresh milk and infant formula company’s New Zealand listed shares are in the red.

Why might the a2 Milk share price tumble lower?

As well as being caught up in a broad market selloff following weakness on Wall Street overnight, the a2 Milk share price could come under pressure after announcing the exit of one of its executives.

According to the release, the company’s Chief Growth and Brand Officer, Susan Massasso, has advised of her intention to step down from her role effective 15 April 2021. From that date, Massasso will continue with the company in an advisory capacity.

The release explains that Susan Massasso intends to broaden her career into more advisory work, including non-executive positions in the future.

The Chief Growth and Brand Officer was one of a number of executives that sold shares in August before COVID-19 headwinds hit the company hard and sent its shares crashing lower. Massasso offloaded 541,391 shares through on market trades.

Commenting on her exit, acting CEO Geoff Babidge said: “Susan has been instrumental in building our brand and business since she joined the Company in 2013. With her passion and commercial insight, she has been a key contributor to our success, and we will miss having her in the business. We are pleased that Susan will continue to be involved in the business supporting the Executive Leadership Committee and reporting to the incoming CEO, David Bortolussi.”

Susan Massasso added: “My nearly eight years at The a2 Milk Company has been the role of a lifetime. Being part of such a passionate team and assisting in the development of this extraordinary business has been a privilege. Our leadership position as pioneer of the A2 protein proposition, our distinctive brand and unique company culture are core elements which will support our ongoing growth into the future. I am also looking forward to continuing my involvement with the Company in my new capacity in the future.”

More reading

• 3 top ASX blue chip shares to buy
• Here are the 10 most shorted shares on the ASX
• 3 reasons why the A2 Milk share price could be a buy
• Here are the 10 most shorted shares on the ASX
• Leading broker downgrades a2 Milk (ASX:A2M) shares

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended A2 Milk. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Eagers Automotive Ltd (ASX: APE) share price is one to watch in early trade today. Shares in the Aussie car retailer could be on the move after the company released a trading update late on Wednesday afternoon.

Why is the Eagers Automotive share price on watch?

Eagers provided some good news to investors after Wednesday’s market close. The company released a trading update for the twelve months ended 31 December 2020 – the first full year of trade for the automotive group.

Eagers Automotive was formed when AP Eagers merged with Automotive Holdings Group in late 2019.

Eagers expects to report an underlying operating profit before tax from continuing operations of $209.4 million for 2020. That would represent a 108.6% increase on 2019’s $100.4 million figure.

Wednesday’s announcement was the second profit guidance upgrade in just six weeks for Eagers. The previous update had flagged guidance of $195 million to $205 million for 2020. The Eagers Automotive share price jumped to a new all-time high following that announcement on 11 December.

Management said the improved profit result compared to guidance had been delivered by strong performance in both its car and truck retailing businesses.

Why is Eagers’ business performing well?

The coronavirus pandemic has proved to be something of a positive for Eagers’ business. Used car and other vehicle markets have been hot with strong sales in the past year or so.

That’s largely come on the back of less economic impacts than anticipated as well consumers turning away from public transport during the pandemic. Strong government stimulus programs such as JobKeeper and early access to superannuation have also helped to increase many Aussies’ cash balances.

That has meant strong demand for used cars, trucks, motorcycles and boats which has boosted the Eagers Automotive share price higher. 

In fact, shares in the Aussie car retailer are up 46.4% in the last twelve months. It’s been a similar story for rival Carsales.com Ltd (ASX: CAR) in 2020.

The Carsales share price has climbed 86.3% since the bottom of the March bear market compared to a 356.5% gain for Eagers Automotive over the same period.

The S&P/ASX 200 Index (ASX: XJO) closed down 0.7% at 6,780.60 points on Wednesday afternoon.

More reading

• ASX 200 falls 0.6%
• Aussies ready to splash on travel, entertainment, cars
• Think you saw growth in 2020? Just wait for 2021: fundie
• Why these leading ASX gold and tech shares could rally on through 2021
• How ASX shares in the automotive sector outperformed the market in 2020

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has recommended carsales.com Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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With the interest rates on offer with term deposits falling to such low levels, you would have to invest millions into them to earn a sufficient income.

In light of this, the share market looks set to remain the place to earn a passive income for the foreseeable future.

But which shares should you buy in February? Here are two ASX dividend shares that are rated as buys:

Coles Group Ltd (ASX: COL)

The first ASX dividend share to look at is Coles. It continued its positive form in FY 2020 thanks to a combination of its defensive earnings, its strong market position, and a favourable redirection in consumer spending.

The good news is that this positive form has continued in FY 2021, putting Coles in a position to deliver solid earnings and dividend growth.

According to a note out of Citi, its analysts are expecting a strong result from the supermarket giant.

So much so, the broker has put a buy rating and $21.20 price target on its shares. In addition, its analysts are forecasting a 63.5 cents per share fully franked dividend this year. Based on the latest Coles share price, this represents a fully franked 3.4% dividend yield.

Westpac Banking Corp (ASX: WBC)

If you don’t have exposure to the banking sector, then you might want to take a closer look at Westpac.

With COVID-19 loan deferrals now at comparatively low levels, solid mortgage growth expected in 2021, and responsible lending rules being relaxed, things are looking a lot more positive for Westpac and the rest of the banking sector.

Analysts at Citi are positive on the bank and have named Westpac as their preferred major bank exposure. The broker recently put a buy rating and $26.00 price target on its shares.

And thanks to APRA removing dividend restrictions, it is forecasting a $1.30 per share fully franked dividend this year. Based on the latest Westpac share price, this represents a 6% yield.

More reading

• 2 ASX 200 shares to buy for dividends
• ASX 200 Weekly Wrap: Change in America spurs ASX 200 higher
• These ASX shares are falling after being hit by broker downgrades today
• Here’s one party Woolies and Coles will not be attending
• 3 top ASX dividend shares to buy for 2021 and beyond

Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia owns shares of COLESGROUP DEF SET. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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On Wednesday the S&P/ASX 200 Index (ASX: XJO) returned from the public holiday in a disappointing fashion and tumbled notably lower. The benchmark index fell 0.65% to 6,780.6 points.

Will the market be able to bounce back from this on Thursday? Here are five things to watch:

ASX 200 poised to fall

The ASX 200 looks set to tumble lower again on Thursday after a very poor night of trade on Wall Street. According to the latest SPI futures, the ASX 200 is poised to open the day 38 points or 0.6% lower this morning. In late trade the Dow Jones has sunk 1.5%, the S&P 500 is down 1.8%, and the Nasdaq index has tumbled 1.4%.

Market selloff

Wall Street was sold off overnight following the release of some disappointing earnings results and concerns about high levels of speculative trading activity. In respect to the latter, according to CNBC, investors are worried that mounting losses by hedge funds could spill over to other areas of the market as those funds sell other securities to raise cash. In addition to this, there are fears that speculative trading in stocks such as GameStop could be a sign the market is overvalued and a pullback is near.

Oil prices rise

It could be a good day for energy producers such as Oil Search Ltd (ASX: OSH) and Santos Ltd (ASX: STO) after oil prices pushed higher. According to Bloomberg, the WTI crude oil price is up 0.5% to US$52.89 a barrel and the Brent crude oil price has risen 0.1% to US$55.94 a barrel. A solid draw of US crude inventories helped boost prices.

Gold price drops

Gold miners such as Newcrest Mining Ltd (ASX: NCM) and Northern Star Resources Ltd (ASX: NST) will be on watch after the gold price dropped lower. According to CNBC, the spot gold price is down 0.35% to US$1,844.30 an ounce. Doubts over the US stimulus bill are weighing on the price of the precious metal.

Aristocrat given buy rating.

Analysts at Goldman Sachs believe the Aristocrat Leisure Limited (ASX: ALL) share price is in the buy zone. This morning the broker has put a buy rating and $34.80 price target on the gaming technology company’s shares. Goldman Sachs has been looking at its digital segment and notes that it appears to have delivered very strong growth in the final quarter thanks partly to its EverMerge game.

More reading

• Investment specialist: ASX to buckle in for the commodity bull market of a lifetime
• ASX 200 falls 0.6%
• ASX 200 down 0.7%: BHP & Fortescue tumble, Reliance rockets, CSL downgraded
• 2 ASX growth shares to buy in February
• 5 things to watch on the ASX 200 on Wednesday

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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A couple of months ago, I wrote an impassioned article about the psychological risks of ‘free’ when it comes to most things in life, but in that case, brokerage in particular.

A couple of people thanked me for it.

But a couple of people said, ‘Can you tell me what broker you’re talking about’?

The sound you could hear was me hitting my head against a brick wall.

I was trying to warn people to be careful, and all some of them heard was ‘hey, this guy knows where I can get free brokerage’…

Such is life, of course. 

And it’s a free country, so they’re entitled to respond that way.

But it makes me reluctant to raise today’s topic.

Still… I will. On the off chance it’ll help someone.

You might have seen the carry-on regarding Gamestop, a US-listed retailer of gaming consoles, games, merchandise and the like.

There’s been, for a while, a lot of people expecting the business to die.

And many of those people have used a financial instrument to attempt to profit from that expectation.

They’ve been short selling: a pursuit that allows you to make money from falling share prices… if you’re right.

It’s a dangerous sport… unlike owning shares themselves, when you short sell, the upside is limited, but the downside is unlimited.

That’s usually not a great starting point (compare it to owning shares where the downside is limited but the upside is essentially unbounded).

I have my issues with the way some short sellers behave – some of them seem hell-bent on using the media and other outlets to try to push prices down – but there are some very decent ones, too.

Still, this isn’t about short selling, per se.

You see, some retail investors on an internet forum decided they’d try to make money by causing pain for short sellers.

I won’t go into the details, partly because it’s boring, partly because it doesn’t matter, and partly because I really, really don’t want our readers playing chicken on this particular freeway.

In any event, at the time of writing, the Gamestop share price is up some 12-fold this year (no, not the last 12 months… I’m talking just in 2021!) as the ‘day traders vs. short sellers’ game plays out.

Thus far, the day traders are winning.

It might end up sending some fund managers broke, too, as they liquidate their positions at hugely inflated prices (remember, that’s bad, if you were betting on the price falling!).

But here’s the thing: No-one – literally no-one – thinks Gamestop is worth the current share price.

At the moment, that share price just reflects a temporary imbalance between supply and demand.

When – not if – the share price falls, there will be a lot of carnage to inspect.

Some short sellers will probably go broke.

Some day traders who end up with almost-worthless shares will probably be sitting on losses of 90–95%.

In the meantime, they’re all playing an extraordinarily high stakes game of chicken.

Why do I care?

Well, many of those so-called day traders are just average, novice investors, caught up in the FOMO frenzy.

And many more, who haven’t yet taken part, are frothing at the bit, waiting for the ‘next Gamestop’ to be unveiled.

Right now, for many of them, it looks like fun. And easy money.

And the stories of the ‘winners’ are the things that FOMO dreams are made of.

No-one wants to miss the next one.

Uh-oh…

If this feels like the dot.com boom all over again (in style, but not in size or breadth), then you’re on the right track.

The worst part?

There are actually two:

First, I feel for those poor bastards who are probably going to lose their shirts, playing a game they barely understand.

Second, I feel for those – a group many, many times larger – who are watching this unfold and feeling like it only confirms their view that the stock market is a casino, and the smart money holds all the cards.

I mean, how could they not see it that way, given the reporting?

So, please don’t ask me how you can get in on the Gamestop trade. I’m not going to tell you.

And please don’t take the wrong lesson from this.

Just because a small, if temporarily prominent, minority are treating it as a casino, please remember that, for the other 99.9% of us, it isn’t, and doesn’t need to be.

Or, as Warren Buffett put it, remember that:

“…[L]ike Cinderella at the ball, you must heed one warning or everything will turn into pumpkins and mice: Mr Market is there to serve you, not to guide you. It is his pocketbook, not his wisdom, that you will find useful. If he shows up some day in a particularly foolish mood, you are free to either ignore him or to take advantage of him, but it will be disastrous if you fall under his influence…”

One of the worst characteristics of our stock market is that regulators allow what is, for all intents and purposes, barely disguised ‘gentrified gambling’. 

A market that was designed to allow you and I to exchange ownership interests in businesses has been instead used, in its darker corners, as something of a mix between an SP bookie, a TAB and a high stakes game of blind man’s bluff.

If it was up to me, that part of the market would be excised and euthanised.

Alas, I don’t have that power.

You and I have something almost as powerful, though: we can simply choose to stay away from those dark corners.

The rest of the stock market is a wonderful place (on average, over time), which has allowed business owners (shareholders) to compound extraordinary wealth.

So, please do me a favour. Don’t read the Gamestop stories.

Or, if you must, treat it as a guilty pleasure: be the voyeur, enjoying it as you would reality TV.

But, just as your life isn’t MasterChef-meets-Love-Island-meets-Big-Brother, nor should your investments be.

Getting rich, slowly, by regularly adding to a well-chosen portfolio that steadily marches higher (with the occasional pullback, like in March and April last year) is the best path I know.

Playing silly buggers with ‘hot stocks’ is like buying lotto tickets or betting on the dogs: just because someone wins, every now and then, doesn’t make it a sensible way to fund your retirement (and walking away with nothing is a terrible, but regular outcome).

So do me – and your future self – a favour: stick to the straight and narrow, please.

More reading

• Investment specialist: ASX to buckle in for the commodity bull market of a lifetime
• ASX 200 falls 0.6%
• 2 exciting mid cap ASX shares to buy and hold
• Is the NAB (ASX:NAB) share price a buy?
• Here’s why the Meridian Energy (ASX:MEZ) share price slumped 8% today

Motley Fool contributor Scott Phillips has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Online trading and investment specialist, Saxo Bank, says the stars are aligning to launch a commodity bull market you’ll be telling your kids about. Let’s take a closer look at what this really means and how a commodity bull market would impact ASX shares. 

According to Saxo’s Q1 2021 Quarterly Outlook for global markets, there have only been 7 true commodity bull markets over the past 277 years. The one they’re convinced is now shaping up could well define the 2020’s investment climate.

What’s driving the nascent commodity bull market?

According to Steen Jakobsen, Chief Economist at Saxo Bank, “A commodity bull market is part and parcel of a new secular inflationary regime”.

Inflation? But aren’t we in a low inflationary, or even deflationary, environment?

Not if you dig deeper into the official figures, says Eleanor Creagh, Australian Market Strategist for Saxo Bank:

Globalisation, a debt super cycle and the rise of technology (the Amazon effect) have all contributed to disinflationary forces, but these dynamics have been overrepresented in official measures and hide the real inflation that exists today.

Creagh points out that contrary to official government inflationary figures, housing, healthcare, education, childcare, shares, and bonds have all inflated.

Most Australians are well aware of how high housing prices have gone over the past decade.

US shares are another area where you can really see asset price inflation at work. Creagh says, “The average US worker must now work 141 hours to buy one share of the S&P 500, a fresh record. In the 1980s it took less than 20 hours to purchase that same share”.

Driving this hidden inflation, she says, are the “expansionary, unconventional monetary policy measures [which] have been deployed repeatedly in recent years”.

Saxo’s report highlights that these expansionary and unconventional policies have only ramped up in the face of the global COVID-19 response. As governments focus on battling rising inequality and transitioning to clean energy, Saxo expects to see more of the same in the years ahead.

Supply and demand

Other major factors Saxo sees driving the next commodity bull market include growing populations, particularly in India. India’s population is set to exceed 1.5 billion by 2030. More than half of its citizens under the age of 30. That’s expected to cause a significant increase in the demand for resources.

There’s also the global shift to green energy. Among other potential beneficiaries are copper producers, with electric vehicles needing 4 times more copper than combustion engine cars.

But Jakobsen isn’t bearish on the outlook for traditional energy shares either, saying:

Even the price of fossil fuels themselves is likely set to rise steeply, as few dare to invest in them anymore… Investment into energy is now less $300 billion a year, down from $900 billion a decade ago, and remember that those $300 billion need to meet an ever-increasing demand for electricity.

Then there’s the coming wave of new investment in infrastructure. Saxo says that the shift to online retailing has yet take into account the required machinery and infrastructure to support the fast growing industry.

How to make money in the real world of 2021

According to Jakobsen, 2021 is seeing this all come to a head as government’s “policy focus drifts away from the traditional focus on ensuring financial stability to one that demands social stability above all else.”

He adds, “The social stability paradigm has three main objectives: to reduce inequality (and through it, increase demand), the green transformation, and the improvement of infrastructure”.

2021 for us is the year where the narrative of a greener, government-supported transformation of the social paradigm meets the reality of too little supply, inadequate infrastructure, and a business world that has been so busy getting digital and virtual that they forgot the real physical world. You can have the world’s best product online and sell millions of units, but if you cannot produce, ship and deliver it, good luck making a return.

Just as Covid-19 reminded us of how vulnerable our perhaps over-tuned economy is to disruption, 2021 will remind us of how we need to live, act and make money in the real world.

What does a commodity bull market mean for ASX shares and investors?

According to Eleanor Creagh:

With Treasury yields rising and the [US] dollar trending lower, emerging markets, Asia, commodities and bets on higher inflation are the place to be, as reflation becomes the name of the game…

As the world recovers from the depths of this crisis, growth will accelerate alongside inflation, while the financial system remains awash with new money; the asset allocation to commodities must be higher.

Huge supply deficits with structural underinvestment, green transformation tailwinds, and the engines of a weaker dollar plus higher inflation will coincide with a historic underweighting and a multiyear bear market to bring a commodity renaissance in 2021.

If a historic commodity bull market is indeed shaping up before out eyes, Australian investors are well positioned to take advantage. There’s certainly no shortage of commodity shares trading on the ASX.

Key ASX players

Santos Ltd (ASX: STO) may benefit from any increase in fossil fuel energy prices, Jakobsen forecasts. Despite falling hard today, the Santos share price is up 6.7% in 2021 so far. It remains 20% down from this time last year.

If copper prices are heading higher with the global infrastructure and clean energy splurge. That should spell good news for companies like OZ Minerals Limited (ASX: OZL). Oz Minerals’ share price also plunged today, leaving it down 1.5% in 2021. Over the past 12 months, the Oz Minerals share price is up 95%.

We’ll leave off with BHP Group Ltd (ASX: BHP). BHP is among the world’s leading producers of iron ore, metallurgical coal, and copper. The BHP share price, also fell hard today. However, it is up 4.6% in 2021 and up more than 15% over the past 12 months.

Of course, there are many more commodity shares for you to investigate in Australia’s commodity heavy index!

Happy investing.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The S&P/ASX 200 Index (ASX: XJO) fell by 0.65% today to 6,781 points.

Here are some of the highlights from the ASX:

Reliance Worldwide Corporation Ltd (ASX: RWC)

The Reliance share price rose 6.6% today after the company impressed the market with a trading update for the first half of FY21.

It said that it achieved net sales of $642 million, up 13% on the prior corresponding period. Earnings before interest, tax, depreciation and amortisation (EBITDA) is expected to be in the range of $164 million to $167 million, up at least 30% compared to the prior corresponding period.

The company also said that EBITDA margins have increased as a result of the strong operational leverage driven by higher volumes, and each region is expected to report strong margin expansion for the period. The ASX 200 share’s management said that a focus on executing its strategy has helped it meet the increased demand it has seen across the market.

Reliance also said that it’s on track to meet its target of $25 million in annual cost savings on a run rate basis by the end of FY21.

The ASX 200 company said that its net debt was reduced by $76 million during the period.

RWC CEO Heath Sharp said: “The first half of the 2021 financial year has undoubtedly been a strong period for RWC and we are pleased with how the group has performed in demanding circumstances…We note that copper cost increases will negatively impact earnings in the second half and currency translation impacts may also adversely impact reported earnings.”

Booktopia Group Ltd (ASX: BKG)

The share price of Booktopia rose by 9.4% after giving investors a trading update.

It said that for the six months to 31 December 2020, it saw its strongest month of shipments in December with approximately 728,000 units shipped during the month and 4.2 million units shipped in the first half.

This led to a 52% increase in revenue to $113 million. There was also a 506% increased in EBITDA (adjusted for IPO costs) to $8 million.

Booktopia said that the first stage of the company’s $20 million expansion and automation project at the Lidcombe distribution centre in Sydney was completed in November and increased outbound capacity from 30,000 units to 60,000 units per day.

Tony Nash, the CEO of Booktopia, spoke of the possible growth into 2021: “We are confident the momentum and growth we experienced in 2020 should continue throughout the year and beyond and as a result the business is on track to meet forecasts provided in the company’s prospectus.”

Eagers Automotive Ltd (ASX: APE)

After the market had closed, the ASX 200 car dealership business gave a profit update for the 12 months ended 31 December 2020.

It said that the company is expecting to report an underlying operating profit before tax from continuing operations of $209.4 million for FY20, compared to $100.4 million for the prior corresponding period. This exceeds the profit guidance range given last month of $195 million to $205 million for 2020.

The company explained that the improved profit result compared to guidance has been delivered by stronger underlying operating profit before tax for both the car and truck retailing businesses.

The final result is expected to be released on 24 February 2021 after the external audit has been completed.

More reading

• Why the Reliance (ASX:RWC) share price is storming 7% higher today
• ASX 200 down 0.7%: BHP & Fortescue tumble, Reliance rockets, CSL downgraded
• Why Booktopia, Nitro, Reliance, & Vulcan shares are charging higher
• Why the Booktopia (ASX:BKG) share price is rocketing 15% to a record high
• 5 things to watch on the ASX 200 on Wednesday

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Reliance Worldwide Limited. The Motley Fool Australia has recommended Reliance Worldwide Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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